Currency is a fantastic social technology which, despite being misunderstood by 99% of the population and poorly understood by 99% of the rest, makes civilization possible. It isn’t the product of any endeavoring intelligence, but an accident; it only happened that some enterprising individuals in a community noticed that some goods were highly liquid, and could be reliably traded for other goods. Not only this, but the development of currency allowed for wealth to be more clearly demarcated and privatized. This “gating” effect on wealth permitted the development of supra-Dunbar communities and the division of labor. Not only that, and more significantly, the privatization of wealth with the consequent de-socialization of individual failure which would occur in the tribe was an initial instance of the capitalization of humankind.
Capitalization, which I use in the sense of carcinisation, is the process by which a population becomes increasingly predisposed towards and dependent on capital. Currency, by better permitting the division between those who can and can’t succeed in a capitalized society, has a eugenic effect; it selects for reproduction those who are better at finding a place in the market made possible by currency while deselecting those unable. Money, in other words, selects for those who are capital-apt. In turn, these more capital-apt populations exert their own influence on money such that currency has become an inextricable element of our societies. We could not rid ourselves of money without ridding ourselves of communities larger than the tribe.
Currency operates as a decentralized storage of information which informs a society how it may best distribute resources. Apart from wealth and consumption, this is significant in that it increases the effectiveness of the self-regulating nature of the economy, where production of what is demanded is rewarded with the capital sufficient to enable that production and production of what is unwanted is a negative feedback loop which sees capital dispersed away from inefficient uses. Economic calculation for the collective is impossible, but money allows individual interests to become aligned to the collective interest by directing the flow of money to those goods and services which are in demand. This system isn’t perfect, but it works far more effectively and efficiently than any system which makes the intelligence of human actors a more significant element in the direction of resources in the economy beyond what is rationally compelling on the individual level.
Through the millennia, currency has seen a number of developmental phases. Gradually, a convergence on the use of gold as a universal currency took hold internationally, for reasons that are obvious in retrospect; gold is sufficiently rare but not too rare, it is useful in making jewelry [making it a useful way of storing and signaling of wealth], it cannot be easily produced from other elements, it can be easily measured, and it does not deteriorate in quality on any human timescale. There are a few other highly liquid metals, such as silver and bronze, which have been used in various societies where gold is exceedingly rare and valuable. The present adoption of fiat currency is, at best, a historical deviation which from a sufficiently far enough perspective will be seen as an unsustainable fad, just one other way governments have used their regulation of the money supply to their own advantage. By its nature, fiat currency cannot but distort the economy, perpetuating bubbles and decreasing trust in the market and the government itself; without interest rates being informed by the market as part of a self-regulating feedback loop, there is no possible way for interest rates to represent an equilibrium between demand and supply while also destroying market information otherwise gleaned by prices.
The process inherent of capitalization is the more effective conversion of energy into the propagation of self-propagating forms. Evolution as a biological process selects for the propagation of forms that are best able to eke out an existence that can utilize available sources of energy in their environment. Though we can identify elements of the evolutionary and respiratory process which appear extremely wasteful, this waste is necessary in that there is no means of detecting what is and isn’t ordered except by a process of letting disordered processes deselect themselves and permitting ordered processes to continue operating and propagating themselves. Currency, we note, is wasteful in the sense that whatever object instantiates the currency, that object increases in price [greater liquidity = more valuable]; gold as universal currency entails gold jewelry will be far more expensive, since a lot of gold is set aside to act as a store of value. This might seem to count in favor of fiat currency, since paper is far less valuable, allowing us to more cheaply use gold for other purposes, but the greater price of gold is less wasteful than fiat currency, which makes everything in the economy more expensive over time.
Most abstractly, currency is infinitely deflationary in the long run. Even being the most liquid asset, it can always become more liquid, which would increase its value; and as it shapes the economy to suit itself, it becomes more useful, which helps it shape the economy more to its own purposes, which makes currency more useful, so on and so forth in a positive feedback loop. The problem is that currency is always particular to some object; while gold might have increased in energy buying power over the millennia, gold might not remain the most liquid asset.
This suggests the process of capitalization working on humanity. Capital seemingly has a mind of its own, and begins to dictate to humanity how it will and will not survive. The tendency towards socializing individual failure is a deviation; in the long run, those unapt to capital will be selected out of the gene pool. It is almost as though capital emerges as a separate being apart from humanity, and begins to exert its own agency on society. [To my understanding, this is something similar to Land’s view, but my research of his work is ongoing so don’t quote me.] I think this view makes a fundamental ontological mistake; capital is not a separate being, but is continuous with, or an extension of, social purpose. Apart from society, capital has no power to exert itself, and depends upon living, breathing human beings acting and evaluating the benefit of capital to themselves in order to propagate. Currency, the purest form of capital, is a reification of social cooperation. Its utility is in better assisting pro-social cooperation. Capital is an artifact; without subjective evaluation and use, capital does not exist as capital per se.
Bitcoin, or at least some related digital currency, is extremely exciting in that it helps make artificial intelligence possible. Some questions about this claim: 1) Bitcoin is by nature fiat, and didn’t I just say fiat currency is inherently distortionary? 2) Why does artificial intelligence need blockchain currency to thrive? 3) Doesn’t artificial intelligence pose the potential of capital separating from humanity, getting legs of its own and propagating apart from human social purpose?
An explanation will come in my next post.